Happy Friday y’all. Well, the “most important jobs number ever” is upon us, with NFP coming out at 7:30 CST. Consensus is calling for an addition of 180,000 job, while Goldman Sachs is the resident optimist on the street with an estimate of 200,000 additional jobs. We’ll cop out and say jobs fall somewhere in between there, and we’ll throw our hat in the ring with an estimate of 189,000 jobs.
So what does this mean for the market? Well, it’s hard to say right now, but we’ll take a stab at it. Markets have shown a considerable amount of resiliency this year as bad news has been good news and good news has been good news. Anything aside from a disastrous jobs number will probably signal to the Fed that we are ready for tapering (though the actual jobs picture is still fairly putrid – Bloomberg flashed a great chart this morning showing a massive deceleration of full-time jobs versus rapid growth in part-time jobs, rhetoric that is being translated as “a job is a job,” which I’m sure many Americans would disagree with). In our view, we’re not convinced that tapering is a death sentence for the market like some pundits are expecting. We partially outlined our stance yesterday, and we do believe that interest rate sensitive equities will take a hit, but with expectations of tapering happening sooner rather than later, perhaps equity markets have already priced in that expectation. That’s not to say that markets will surge out of the gate no matter what today, but we would refrain from calling tapering a major downside catalyst.
There are still other factors that could send the market into a swoon, including the ongoing situation in Syria and the seemingly never-ending debt ceiling debate (which feels like a non-event). While it is likely the proverbial can will be kicked once again when it comes to the debt ceiling, predicting an outcome in Syria is an exercise in futility as the Obama administration has been horrendous when it comes to execution. Let the market react as it will, just be wary of leaning too hard one way or the other. This is a headline-driven market until further notice, and selectivity will be paramount until these events are in the rear view mirror.
We pared our gross exposure yesterday to pocket some gains and allow some added mobility ahead of this jobs number. Whatever your market sentiment, just remember one thing today: keep your head on a swivel.
(Anchorman is clearly a theme this week)
Got a prediction for the jobs number and the corresponding market reaction? Throw it in the comments.